Sunday, February 15, 2015

Moral Case for Greek Austerity?

I think it's very interesting that in the case of Greece, we've wound up in a situation that appears, from a moral perspective if not an economic one to resemble that of the Central Powers after their defeat in World War I.  A broken power who had wronged the group at large (albeit with noticeable contributions from those who had won the war) was being asked to make amends for their wrongs.  There was a debt to be paid.  It would be extracted from the nation, even if it hurt that nation.

Honestly, I find the parallels between the two countries to be striking.  Paul Krugman has found an interesting connection between the two countries here.  He suggests that
Austerity, it turns out, has devastated Greece just about as much as defeat in total war devastated imperial Germany.
I'll grant that there are far different circumstances going on now versus then.  But is it not odd that the nations of Europe would replicate an activity (essentially reparations) that was roundly felt to be a  wrongheaded and vindictive move 100 years ago?  And is it not even more so due to the fact that there wasn't a war; that Greece was involved in provoking a conflict that killed over 10 million people?  How has Europe/the West changed that the impoverishment of a nation over bank loans appears to have greater moral/legal standing than engagement in one of the most destructive wars of all time?

I think it's safe to say that Europe is acting on much stronger legal grounds than the Allies during/after World War I, but morally this seems far more dubious.  Is the economic destruction of Greece really worth so much?  Or are the news stories from Greece describing serious hardship an exaggeration?  Why are the reasons here stronger now than then?  I'll grant you that the victims are not a threat to the peace or economic life of Europe and so this isn't going to land us in serious hot water in the same way that the Treaty of Versailles impacted things.  And that there are legal and economic reasons for this policy.  But a poorly constructed idea based on punishing a wrong then is wrong now; perhaps more so if the wrongs are less.

The more I look at events like this, US in Iraq again, and Russia in Ukraine, you see examples of the law being only effective/helpful if you happen to be strong enough to enforce it.  Sovereignty appears weak when someone takes it from you and you don't have friends to take it back, or in Greece case, you sign it away.  I think it's worth considering if the legal trappings and righteous vestments we've thrown around ourselves are in fact doing what they were intended to do.  They had a purpose and reason for being that was supposed to make the world a better place for all nations.  Obviously they still do good, but I think that the past decade has shown that perhaps the good had less to do with the institutions themselves and more to do with the people running them.  The current crop of bureaucrats and bullies is as good as any indication that we haven't come that far from our past and should be wise to reconsider the our countries moral compasses.


  1. "Austerity, it turns out, has devastated Greece just about as much as defeat in total war devastated imperial Germany."

    More like "pushed back to its actual poverty level".

    Well, not quite. As a country it's still living beyond its own means:

    Germany was depressed far BELOW its natural economic growth rate by WW1, whereas Greece did in large part bust a bubble of easy foreign money.
    Germany had territorial losses, localized civil war actions, coup attempts, hyperinflation, a workforce loss of almost ten per cent, hundreds of thousands died after the war to influenza because of years of malnutrition. The Versailles treaty was clearly considered worse to ending the war without a treaty, whereas the legal and legitimate Greek government preferred the conditional aid over no aid.

    It's typical of the Greece-centric attitude of whining these days (very much unlike the Portuguese behaviour) that somebody would compare both cases to begin with.

    I do usually read Krugman's blog and occasionally his column, but this one was utter crap at the end. Even his graphic shows that just looking at one year less turns the conclusion around already. Additionally, the one-dimensionality of using GDP loss as the one and only measure of devastation is embarrassing.

    1. Sven, do you know if the chart you showed included loan repayments or not? Krugman indicated that the Greeks are positive in the balance of trade thing if you took out the loan repayments, I'm just trying to figure out whether or not that is valid.

    2. Loan payments are payments for services rendered. There's no reason to subtract them from such a chart.
      You pay for money lent with the same legality and legitimacy as for an imported car.

    3. That is what I thought but now we have a bit of a contradiction.

      Krugman, whom I normally trust when he isn't spouting politics, says the Greeks are running a trade surplus without the loan payments. You, whom I normally trust, say the Greeks are still running a deficit. Which is right?

    4. Never mind, I figured it out for myself. I didn't read Krugman correctly. He explained that the Greek government is running a surplus, not the Greek economy.

  2. I also find it really hard to understand the constant whining about a financial package you chose to adhere to. There were plenty of examples of this being a bad idea:

    For instance:

    Where countries refusing from IMF aid ended up being better off. Also the Argentinian example mentioned before.

    Am I speaking from the high well-off horse of Western Europe ? No, I'm an Estonian.
    Estonia is living considerably worse off than Greece, no matter how you spin the numbers. We also did the austerity ride voluntarily, paying for our financial bubble. We also had (and still have) huge unemployment rates and GDP drops. Yet, most of us at least realize why we are in this situation.

    It's not because of our Soviet inheritance, our populist corrupt politicians (usual election slogans). While these things certainly make things worse, the main problem is that we are not producing and exporting stuff that people want! Not even for the standard of living we currently have, let alone for what we want!

    Our export breakdown is not terrible:

    But it's far from where it should be. There just isn't enough "value add". E.g. instead of raw wood we should export more hard-to-manufacture products made from wood. If we continue to export raw materials and easy-to-make parts, then we have to compete with countries like Indonesia and China for both market share and standard of living. No social policy is going to change that (lest we'd be leeching the rest of EU). There are companies that produce complex parts but these are still far too rare. Compared to Germany we are still "producing potatoes".

    Now here is Greece in comparison:


    1. ...
      Cost of living references:
      First, average cost of living.

      As you can see, the difference is marginal, but it's actually a bit cheaper to live in Athens than in Tallinn! While food is 20% cheaper here, heating costs are absurd and rent is a lot higher.

      Also, mentioning people who are not as good off as the average. Minimum wage in 2014 in Estonia was 355 euros (pensions are a lot worse) and during winter months the heating costs alone can be 60-100 euros per month. In 2015 it was raised to 390€ but it's still quite a bit off.

      How do these people survive, who only qualify for minimum-wage jobs ? Only one solution. They work abroad! A lot of people emigrate for good unfortunately. Our unemployment of youth is low, compared to Greece, but far from nonexistent. I know quite a few arrogant ex-classmates, having no qualification but unwilling to work e.g. in McDonalds or Statoil for minimum wage. Complaining about not moving a muscle below 1K euros etc. But somehow they survive, meaning their parents pay for their living-costs.

      To me, the biggest question is, if your unemployment amongst youth is so damn high, why aren't they emigrating ? The reason can only be the same as for the minority that stays here. Some social programs or relatives keep these people afloat, so they don't really need to get a competitive job. If they were forced to choose between starving or staying in Greece (a number of Estonians actually are), they would have emigrated long ago.

      The tragic bottom-line is, that despite your "German inflicted terrible WW1 aftermath situation" (which somehow manages to be better than most of Eastern-Europe) a majority of Greeks is still living too good off. Even when the entire debt were waived, no matter the "corruptness" of the politicians, etc. As long as you don't want to change what you export, you can't even live as well as you currently are.

      Germany had the know-how, will and ability to produce complex, world-class, high-tech industrial machinery, parts, etc after both the WWs. This is why they managed to recover, Marshall's plan or no. So even if the debt is similarily erased the result will NOT be the same. The same is true for Estonia when compared to Germany (debt or no).

      Only long-term policy changes (teaching people as they do in South-Korea, etc) can change this in decades. Not asking for "moar money" for yourself and the pensioner next-door.

    2. This comment has been removed by the author.

    3. Anon: Your comments are logical but logic isn't the only issue at play here.

      As I mentioned in an earlier comment string, international discussions are hard, not just because of the language or currency differences but because of the intangibles. Culture and customs make things are routine in one culture impossible in another. This makes discussions of what is and is not moral even harder.

      Culture and customs are the result of what people have observed as "good" and "right" over the course of hundreds of years. The big challenge is what to do when something turns what was "good" and "right" into "catastrophically bad."

      A horrific example occurred when the Titantic hit an iceberg in 1912. Some people, faced with a situation that just wasn't in their cultural handbook, put their children to bed rather than risk their children being lost in the icy water at night. There simply were no good solutions and these people chose what they thought was the least bad and put their faith in God. I will never be able to agree with them but I was not there at that time facing that decision. You really cannot criticize a culture until you've lived there for a few years.

      Even big countries face culture and custom challenges. Just imagine a person from Boston trying to close a deal for a big factory in rural Alabama without a local translator/cultural interpreter. Same language, same culture, several hundred years of shared history, still almost impossible cultural differences.

  3. When the Greek sovereign debt crisis first broke, the possibility of allowing or forcing a Grexit could have brought the whole Eurozone down. The official reason for a bailout was for the good of all Europe, as well as Greece. Austerity was the snake oil de jure, and was made the cornerstone of the recovery process, just as was done in other PIIGS countries. However, Greece was a solvency problem, not a liquidity problem as in the other states, and the austerity resulted in an economic and humanitarian catastrophe.

    Now, the bailout so far, was a series of timed loans tranches, each dependent upon Austerian inspectors accepting program compliance prior to each tranche. So this continuing plunge to catastrophe was concurrent with inspectors saying the program was on track, even though unemployment and GDP contction was massively greater than predicted. Process was more important than utcome, and the prior Greek government just went along with it.

    Of course, this led to Syriza's win at the polls, and Syriza had the balls to say that the program is a failure and will continue to fail, at the expense of the people. They even had the audacity to deman Herh a new program be investigated. However, their position, while morally strong, was weakened by the fact that a Grexit now might be survivable by Europe. So why take a chance on a Grexit?

    1. Austerity is almost a religious belief. Can't have that God debunked.
    2. No way in hell the Austerians want to admit any error, however slight. Open the door to reviewing any and ll applications of austerity.
    3. Any Syriza winn, however slight, will only reinforce the anti-austerity forces that seem to be moving towards victory in other southern Europe countries. Syriza must be destroyed before contagion occurs.

    So, a progrm that was said to be in no way punitive when implemented is now pinted as not only punitive on purpose, but that the Greeks deserve to be punished. They have started masking the failure of the Greek program with morality issues. Bullshit, fabricated morality issues. The Greeks are suffering because they were bad to begin woth, not because the Germans et al misdiagnosed and mis-prescribed.

    PPFK- It is not economics. It is not morals. It is ego and self protective politics hiding behind economics and morality. Has no relationship to Versailles and Weimer at all, other than the damage being willfully imposed on the Greek people. At least at Versailles, they were honest enough to say they were being punitive.

  4. P.S. I'm on the road posting from a tablet with a sensitive screen keyboard, so firgice the typos.

  5. To get an idea of the level of ignorance of local conditions the Austerians had, let me offer this tidbit I received from the Minister of the Interior, a well educated public planner, fellow Parian and an acquaintance of ours. The Greek ferry system is a critical element of national infrastructure. A fair portion of the population is dependent on the ferries for survival. Thus, ferry operations are tax subsidized to ensure a minimum level of service year round. Some routes are self supporting during the tourist season, but that's 1/3rd of the year.

    One of the Austerian rocket scientists had a program to present to reduce the subsidies. When he had come to Greece on hoilday, he took a smaller, slower, older, less "luxurious" ferry to get a lower fare. The Greek people did not need the large, more luxurious ferries, with the attendant higher operating costs, in the winter. Put the big ferries in winter storage rather than the small ones and save a fortune in subsidies. What the Austerian completely overlooked was that the smaller ferries were not safe to operate in the higher winter winds. As it is, the larger ferries are cncelled due to wind about 25 - 30 days each winter. Based on actual meteorlogical data, the smaller ferries would suffer more than double that rate. He had no idea of the impact of extended ferry outage on the islands, especially ones of a few days' duration. Also, the smaller ferries' lower speeds make them impractical for the "milk run" routes that the larger ferries make in the winter, when they serve all the islands with reduced numbers of ships and reduced frequency. It would actually require more smaller ferries to do the job of the fewer larger ferries, at a higher total subsidy cost. The Greeks have been doing this shit for centuries, so perhaps thay know what they are doing?

    But then, that Austerian had no concept of the infrastructure needs of an island nation. Even sadder, was that he was foolish enough to say he made his recommendtions based on his vacation experiences. He was just preaching his Austerian religion without regard to fact. Cutting subsidies across the board to public transport worked in his primarily land locked country, so why not Greece? Never dawned on him that land transportation and water transportation aren't quite the same.

    1. "Thus, ferry operations are tax subsidized to ensure a minimum level of service year round."

      According to economic theory, this is inefficient and distorts the outcome in favour of more population on islands; the subsidy worsens the need for a subsidy. Noticeably, islanders in countries with few islands miraculously live without such subsidies.
      Germany has no such subsidy, Canada has afaik no such subsidy, the UK has afaik no such subsidy, Finland has afaik no such subsidy, Italy has no such subsidy ... and save for Italy all of them have worse winter weather.

      The subsidy is similar to rural area 'development' projects in Germany, though. I've been in contact with those and can assure you the regional development clique is highly allergic to economists or actual cost-efficiency calculations and all its program evaluations are rigged rackets.

    2. On the west coast of Canada, BC Ferries is the regulated ferry operator.

      They almost break even running the major ferries route in the south (eg. between Vancouver and Victoria).
      However, in the north (less populated routes), government payments account for three quarters of the revenue.

      I don't know much about the east cost, but given that the operations are run largely by the provincial transportation ministries or crown corporations, I suspect that they do not break even.

    3. One more thing, if you think that the Aegean in winter can be rough, let me tell you about a place called The Straits of Belle Isle.

      Winter in the North Atlantic is harsh and the money to operate the ice breakers needed to keep the ferries operating in the shoulder seasons certainly doesn't come from the ferry operators.

  6. Worth a glance:

  7. Washington State ferries are also subsidized. I guess Greeks don't read your economic theory books, Sven. Population in the Cyclades has been pretty stable over the 15 years we have been there..

    Are you suggesting cleansing the islands of people to save money? Interesting that you condemn a practice without knowing one iota about the magnitude of the subsidies. Is that sound economics?

    My respect for economic analysis went down the drain when I saw how many economists, when shown the gross economic activity figures for an unnamed state for 2005 -7 said it looked like healthy growth. That state was Louisiana. The figures were the expenditures on disaster relief.

    1. Whether population has been stable or not is irrelevant. Without the subsidy living year-round on an island would be less attractive and ceteris paribus the islander population would be smaller at least in winter. "ceteris paribus" is the way to look at such things, and scientifically trained people do it.

      It's always nice to receive a subsidy, but there are VERY, VERY few subsidies that serve to improve general welfare. Almost all subsidies cause a loss of general welfare. A notable exception is a subsidy for positive externalities. Another notable exception is when widespread stupidity or lack of liquidity are dominating (the Malawi farmers example).

      It always looks harsh to withdraw a subsidy, but it's usually the right thing to do because it benefits the silent majority.
      It's well-known in political sciences that special interests are getting disproportionally high attention because few people affected much by legislation can organize easier than a vast majority affected little individually, but at least as much as a group.
      In the ferry case, the relatively few islanders leech at the continental Greeks. The continental Greeks cannot throw their weight into the debate because they cannot organise their anti-ferry subsidy interest.
      It's one of the principal problems of Greece that the population believes too much in special treatment, even though if everybody gets special treatment all are worse off.

      If the ferry subsidy was deleted entirely, the islanders would have to express their demand for ferry services by offering to pay the full price themselves. It's their problem that they're living in such remote places. Why should continental Greeks pay for them? Deal with it by paying more to the ferry operators or by setting up bigger storages.

      And the magnitude of the subsidies is irrelevant to the question whether they're a good idea. That's a qualitative question.

      Economists like all humans can always get something wrong by missing some details, but that's no carte blanche for people demanding subsidies by others or other gross violations of economic research insights.

      By the way; I just looked at the subsidy report of the federal German government of 2012 and used text search for the German word for "subsidy". No hits.

    2. Interesting ideas, Sven. Quite alien in some ways. Here in Canada, we subsidize roads (toll roads are extremely rare), which was devastating to the railroads (which have to pay for their roads, and charge for them). Obviously, some roads are used a lot more frequently than others, but most people support the subsidies.

      With modern information technology it would be relatively easy to track license plates on various roads and charge people accordingly. I suspect, however, it would cause political problems in that those who benefit most from the subsidies would cry murder and those who would benefit from abolishing them don't benefit enough to slug it out with those who care. I suspect this is a fairly typical problem faced by politicians.

    3. Ael, I wrote nothing but textbook economics here. I suppose even Mankiw's (a Republican) textbook covers these things just this way (my university department didn't like his textbook, so I only learned with it for one semester).

      Does Canada have a tax on cars or on fuel other than VAT?
      Because these could be considered loose charge fees for the roads.

      Germany has a toll only for trucks on motorways, but the federal tax revenues from car taxation and fuel taxation (other than the extra CO2 tax) exceed the federal spending on roads by much.

      Your surveillance idea with license plate tracking is disturbingly Orwellian, but you're not alone. Such toll collection schemes were discussed and may be in operation somewhere already.

    4. Yes, we have registration fees for cars and some provinces charge extra taxes on fuel but those revenues don't come even close to paying transportation costs (Canada is *big* and has lots of roads). Furthermore, the revenue does not align with costs. For example, keeping the country roads open in winter takes a lot of snow plows. Furthermore, the priority goes to the school bus routes. So a farmer who lives at the end of a 2 km public access road, gets priority call so his kid can make it to school the next day. The $100 a year registration fee for his pickup truck doesn't cover the cost of the snow plow operator driving up to the *start* of the access road on the first snowfall of the winter. And yet, I (who live in a city) with 5 vehicles, gets the road plowed in front of my driveway done maybe twice a winter. Of course, the cities arterial roads are plowed quickly, but getting to an arterial road can be an interesting 500m drive.

      And the thing is, I am ok with that.

  8. Sven, how many ferry serviced German islands are 100 or more km from the mainland. On what basis do you compare brown water ferry operations to blue water? While geography is not a subser of economics, it is required subject in most school systems.

    Some would suggest that Lower Saxony indirectly subsidizes off season operations. The state operated ports charge port fees which are significantly discounted for ferry operators who contract for year round service. The one operator who attempted summer only operation found the "regular" port fees so steep that they could not structure a viable operation. In a study by the government of Scotland, it was concluded that Lower Saxony was basically assuming port operation costs that full year contract ferry operator discounts failed to cover, and thus indirectly subsidized such contracts. A semantic nit-picker might challenge the Scottish report's ananysis, but does it make a difference to the bottom line if the govt gives a subsidy in the form of payments to your income stream or assumes the cost of what would normally be on the expense side of the ledger?

    1. Aviator, aside from Helgoland being far out, brown or blue water is a nonsensical distinction in the German Bight. The sea states, storms and storm springtides are bad. We have 8.30 m seawalls, up to 8 m river seawall heights and substantial counter-coastline erosion efforts for a reason. Many ports aren't capable of operation year-round because the North Sea misbehaves this often.

      The German ports at the North Sea coast are in substantial part tourism operations benefiting the port town. There are more tourists in the harbour in daylight than people working. The attractiveness of the town to tourists is being bolstered by the ability to do a one-day trip to an island. As I mentioned in another comment on this page, positive externalities can justify subsidies.
      Besides, you get less fee income from ferries if they aren't operating than if they operate with a discount, so the port authorities may actually have optimized their revenue. In this case, a discount is no subsidy, just as the supermarket around the corner doesn't subsidize me if it sells me chocolate 30% off.

      Pondering on the latter, maybe the Greek subsidies don't subsidize the islanders and ferry owners only, but also the port authorities since they can shave off higher fees if the ferry operators get subsidies? The more places the subsidy ends up at, the less essential the subsidy is for the islanders actually.

      And finally, judging by the small North Sea ports that I know, it makes no sense to assume that port authorities gave a discount to the ferry operators because the ferries are usually the only large ships in those harbours. What other large ship's fee could be the benchmark to determine a discount if there are none? The search and rescue ships (about 27-46 m length) are usually the biggest other units in such tourism&fishing harbours.

  9. Since the ports are government entities and have published port fees, a discount is still a discount. Thus, they are either subsidizing the ferries, or are publishing falsely high fees to make it look as if the ferries are getting a discount. Take your choice of which subterfuge is being practiced. The one ferry operator who did try to operate without a discounted port fee, couldnt turn a profit, as it drove fares too high to be able to compete. Were the "published" port fees artificially high to deter seasonal operators? Not quite a level market place, by government decree.

    It costs a hell of a lot more for a ferry to travel a 200+ mile, one way, multi-island route than any of the German routes you offer in comparison. It's not the rough seas that run up cost, but distance. Plot the distance from Athens to Crete, Rodos or Chios. Paros is 90+ miles from Piraeus. That is where we go for specialty medical care. Consider the human impact of a 5 day ferry outage if we "saved money" by putting the smaller, lower cost ferries in service. While an economist or accountant does not enter non-quantifiable human needs or suffering in their equations, thank heaven other public officials do.

    I would suggest you do a little reading on your "lifeline" laws. If summer tourism to those islands were to drop to where summer revenues couldn't support winter traffic, subsidies will automatically kick in. So when the market fails, Germany stands ready to dip in the taxpayers's pocket.

    1. It happens that people post a vase at ebay for sale and demand a high minimum bid, getting no bids.
      Next time, they offer the same vase with a lower minimum bid and sell.

      Did they subsidize their customer?
      No, that's market pricing.

      The distances and costs per travel with Greek ferries are irrelevant to the question whether a subsidy is appropriate. That's a qualitative question.

      Furthermore, economists take human suffering into account. The United states' federal agencies have a price tag for lives, for example. A life is worth up to 9 million USD. The agencies use this threshold value because resources are finite (people in Greece may still have difficulties grasping this).
      They might refuse to let someone die and spend 10 million to save the person (by making a road safer, for example), but this would mean someone else would die who could have been saved for 8 millions and another person gets crippled who could have been saved for 2 millions.
      The marginal rate of return has to be even to avoid waste of scarce resources. Sentimentality in one place kills or causes greater suffering elsewhere.

      One may subsidize ferries in Greece to help people get to hospital, but this costs the nation dearly elsewhere. Maybe some avalanche protection wall construction gets postponed and people die there. Or hygiene inspectors get laid off and people die of food poisoning from a new restaurant.
      Can't Greece have all? Cheap ferrying, hygiene inspectors, avalanche protection?
      NO! It's shit poor because its industry sucks and it cannot afford this and the rest of the Europeans won't gift it to them either, not the least because many East Europeans are even worse off.
      Now start running the country with skill instead of a "let's please this demographic, let's please that demographic" attitude.

      "So when the market fails, Germany stands ready to dip in the taxpayers's pocket."

      Doesn't matter. Right now, the members of parliament even in the ruling coalition's caucuses are letting the public know they won't throw good money after bad money any more. The chancellor and secretary of finance aren't even trying to convince them. A few more days and the parliament will likely not even consider any proposal because it hates getting blackmailed into deciding on billions of spending in a few days.
      Right now it looks as if Germany wouldn't give any more money to Greece, nor guarantee any new bonds. The markets and the central bankers have begun voicing their expectation of a Greek bankruptcy and exit.

      But we know that already, especially so the French. They were in a monetary union with Greece already a little more than a hundred years ago and guess which country cheated itself out of that monetary union by enriching itself at the expense of wealthier partners. Guess!

    2. Sven, you have a habit of talking out your arse when you pontificate on what takes place outside the boundaries of Germany. There is serious debate in the US at present about the value of human life, but nowhere has public policy set a given figure for it. Public policy, not economic analysis for litigation.

      Again, you perceive that Greeks have issues with subsidies for ferries. Believe it or not, it is a cognizant decision to do so. You may not like it, but Greece does exist for your pleasure.

      If you are going to condemn the current Greeks for actions over a century ago, then I would offer that you have granted Greeks license to refer to Germans as still showing Nazi tendencies. As is so often the case you open the door to such with your shucking and jiving.

    3. So you're implying I'm a liar because I made up a figure?
      So you claim I am "talking out [of my] arse"?

      Too bad you didn't even run a quick check before you challenged me. Even Wikipedia
      could have told you about your ignorance.

      Now I'd like to state that you're "talking out of your arse",
      whereas I was repeating what I had written in a blog post in 2013 after doing the necessary quick research:

      The Greek monetary union behaviour of a hundred years ago is similar to the Greek monetary union behaviour of today for similar macroeconomic reasons.
      Feel free "to refer to Germans as still showing Nazi tendencies" as soon as we annex some country or discriminate minorities as a policy.
      We don't fit the historical parallel, the Greeks do. Thus the Greeks' historical parallel is noteworthy.

    4. Sven- by wikipedia's own statement, the page you cite "has some issues". Primarily, the narrative provides no verifying citations. Thus, amateurish entry

  10. So Ael's direct toll scheme is Orwellian, but your forced population relocation by economic extortion isn't? Mainland Greeks are not begrudging the island population the taxation that makes their life possible. Greeks just aren't into forced relocation. Maybe that's due to adherents of a different claimed set of perverted scientific principles tried it in Greece in the 1940s.

    Perhaps you begrudge any and all taxes that benefit another more than they do you, but generalizing your egocentric scientific principles to others is a bit presumptuous, and totally unscientific. Such blatant disregard for "others" seems consistent with German law that only defined bribery as that which seeks to thwart competition with another German company. Thus, Siemens was able to legally pay bribes with impunity, as long as it was companies of other countries suffering their shabby ethics. But heaven help a non-German company that used a bribe to beat out a German firm. Yup, that kind of shit in the 21st century.

    If we followed your exhaulted scientific principles, most of the rural civilized world would have no paved roads, electricity, potable water or basic human services, or the cost of food would be out of reach of half the population. Your scientific theories would be great, Sven, but for one small complication. The value and sanctity of human life is not included in your formulae. All the precise calculations in the world aren't worth a shit if they ignore and/or promote human suffering. A vast number of Greek islanders live on land handed down through the generations. While Germany is a nation of renters, and relocation is no big deal, such is not the case in Greece. Now get out your slide rule and do the math of being able to sell one's house in a market of growing, forced outflow of the population. Oh, and I would also note that Greece has about the lowest rate of mortgaged residential units in the industrialized world - 30%. 70% of residences are mortgage free. It's a shame your university curriculum didn't have any sociology courses.

    1. "So Ael's direct toll scheme is Orwellian, but your forced population relocation by economic extortion isn't?"

      Indeed, and any objective person who read 1984 would agree, since that's a book about surveillance and oppression, not about people moving because they live at a worse place than their next destination.

      "Yup, that kind of shit in the 21st century."
      Except it's not. Legislation was changed long ago. Besides, you could look up some legal principles, such as when which court is responsible to act and when are others. A Greek court can sentence Siemens to pay and the German state would force Siemens to do so due to EU and treaties and stuff. There's no need for a German court to rule in the case.
      Now let's guess in which country officials were corrupt, civil society and law enforcement failed to intervene in time.

      Aviator, you expect Germans to lend money to Greeks so they can subsidize islanders who don't want to give up their houses and live somewhere else at least in wintertime?
      I can tell you EXACTLY why there's no sympathy for that: You can buy houses for 10,000 € in rural East Germany because the people there moved away and gave up their houses.
      We will totally not throw our money into the endless pit of Greece so they can have luxuries which we don't have ourselves in our attempt to run a good economy.
      If anyone, it's us who will get to sustain such amenities.

      Greece is poor because it has a shitty industrial sector, Greece has a very poorly-run state, Greece as a state is bankrupt, Greece as a nation needs to leave the Euro zone to get flexible exchange rates to enable recovery, Greece has to live with its relative poverty. Just as Slovakia, Estonia, Latvia, Lithuania, Romania, Portugal, Croatia, Bulgaria and Hungary have to live with their actual relative poverty.
      No free lunch from Germany.

      I mean, seriously, the Greek government wants billions in new loans, tells the lenders it doesn't want to repay its old loans, tells its lenders it will disregard its other obligations under the old loans and then the Greeks still think they're going to get fresh money or guarantees in order to live nicer than they can afford actually???

    2. Sven, again another illogical non-sequitor. You address poverty in the same breath that you suggest the cure for ferry subsidies is that islanders maintain two residences. One for summer and another for winter. You may be a brilliant economist in your own mind, but you clearly have no idea of personal finance. Or are you assuming that the islanders live where they do because they are wealthy?

    3. I was being accurate, since the costs in winter time are the issue apparently.

      Besides, it's perfectly ordinary for millions of tourism employees world-wide to live at the hotel only during main season. You don't suppose the people who work in hotels high up in the Austrian alps live there year-round, do you?
      I had a personal friend who gave me insights into how this seasonal migration of employees (he was sous-chef cook in an expensive hotel) works. By the way, his next summertime job was at a beach bar on Crete.

      There's not much fishing in rough winter seas nor much to do in agriculture during winter time, so I suppose yes, sparse population during winter and bristling tourism/fishery/agriculture business in summertime is perfectly possible. Unless of course you simply accept the REAL costs of living on islands by paying the appropriate ferry costs instead of burdening other Greeks who do not benefit of the winter ferrying service with it.

      But we both (and I suppose others as well) know that you insist on ignoring the expenses of the silent majority and focus all on the benefits of the beneficiaries of subsidies.
      And that's how not to run a country. Exhibit A: De facto bankrupt Greece.

    4. Sven, again you speak of what you do not know. Fishing is a year round activity, as is agriculture. Just because the weather isn't conducive to tourism, all other commercial activity doesn't a halt. And, unlike your alpine ski center, the Cyclades and other islands have to produce their own electrical power. The Paros generating station provides power to some 9 or 10 islands in a 35 mile radius. The winter populations are a fraction of the summer working population. The farms that are worked in the winter provide some of the food tourists eat. Thus, not just agriculture, but animal herds must be tended. And those doing that work will require schools for their children, medical personnel, water system operators, grocery stores, petrol stations, etc, etc. Comparing a 76 sq mile island that caters to tourism to a mountain hotel is ridiculous. Stick to economics.

  11. Ael- that farmer should be required to pay the full cost of plowing that road, not the citty dwellers. If the cost is too high, then the farmers will move to the city, in accordance with so called acceptable, scientific economic principles. After enough farmers are forced off their farms, then the city dwellers will agree to pay the higher costs of food from farmers who will pay the full price of plowing, plus the markup to get a reasonable % profit. But we can tell the city dwellers that they are no longer being taxed for the benefit of the farmers. Just paying more for food, which will then be blamed on farmer greed. I weary of such illogic, no less the pitting of human against human explicit therein. Like it or not, scientific economists of the world, we are all in this together, and it's a gave of mutual cooperation and modest sacrifice.

  12. PFK- I would offer a better analogy than post WWI, that of post WWII Germany and the totally forgotten JCS 1067 that drove Allied policy toward Germany until late 1947. In the case of JCS 1067, the Allies admitted, after extracting many pounds of flesh for over two years, that a continuation would result in a major economic, political and humanitarian disaster. Indeed, the humanitarian disaster was well under way. By summer of 1947, the German population was suffering an adult death rate of 4X that of 1941, and the child death rates were 10X that of 1941. While on could have easily built a case that they brought it on themselves and deserved every bit of it, saner heads prevailed and the policy was changed to support helping Germany to get back on its feet. Five years later, when it was obvious that Germany's debt loasd was still a major obstacle to a timely economic and humanitarian recovery, a major program change, consisting of huge debt write off was granted. Now that's a success story of applying a willingness to admit a program was flawed to get a long term economic, political and humanitarian success. Germany did not receive this massive aid because she deserved even one penny of it, but because she simply needed it, and the world needed her to succeed for their oown well being.

    Sadly, for reasons I cannot begin to fathom, history was successfully rewritten to skip over the inhumane application of JCS 1067, act as if the gushing beneficence of the Marshall Plan began hours after Germany's surrender, and that Germany single handedly climbed out of the ruins singlehandly. Ask the man on the street about the London Conference of 1953, and you will get a blank stare.

    So why does Versailles merit being held aloft as a lesson and not the events following WWII? Because Versailles is the reason given for the rise of Adolph Hitler, not some character flaw in German culture. The Western Allies are responsible for creating the monster that slaughtered tens of millions. We forced the German people to do it.

    Of course, intellectual honesty would require us to give a fair amount of credit to Joe Stalin for Germany's economic miracle. Had he not been poised on the other side of the border, ready to be the post war answer to imposed German suffering, as in 1933 all over again, how willing would the Allies have been to sacrifice more of their national treasure in dealing with German suffering? You can rest assured that many amongst the Allies harbored not a single doubt the the German masses could rally under Stalin as readily as they did under Adolph. So we took the more prudent route, pretended that underneath all that Nazi stuff was a German people who really had not idea of what Adolf was up to and the rest is neatly scripted, feel good history.

    Thus, there is not a lesson to be learned from 1945 to 1953. It is. interesting that the very people who demonize the Greek people owe their very existance to the Allies' willingness to buy the idea that the monstrocities of the Third Reich were the product of a very few. Kind of undermines our calling out the US population for allowing GWB and Co for their autrocities, doesn't it.

    Kind of hard to place a moral element on things like this, PFK. I have more respect for the leader who is prepared to openly admit when they have made a mistake and will move to correct it, than those who see such honesty as weakness.

  13. "...After enough farmers are forced off their farms, then the city dwellers will agree to pay the higher costs of food from farmers who will pay the full price of plowing, plus the markup to get a reasonable % profit. But we can tell the city dwellers that they are no longer being taxed for the benefit of the farmers. Just paying more for food, which will then be blamed on farmer greed. I weary of such illogic, no less the pitting of human against human explicit therein. ..."

    Aviator, the important point you conveniently ignore or dodge is a very simple one: As long as there is the consensus on BOTH, to use tax income for infra structure or entitlements AND to pay/collect a sufficient amount tax money there is in principle no problem. However, friction arises when the consensus is lost in respect to one of the two aspects.

    Infra structure or entitlements that are not covered by tax income, and here it does not matter whether this is a results of low revenue from tax, i.e. weak economy or low taxation, or inefficient collection or even combination of both, lead to problems in the long run. These problems then lead to very basic considerations outlined by Sven.

    And yes, without the willingness or ability of the city dwellers to pay taxes the price for food will increase.

    And yes the world is unfair, i.e. one country may be able to afford infra structure and entitlements that others can not afford but would like to have.


    1. Ah, so someone caught the nuiance. The social contract is much moe complex tham "scientific economic formulas". You will never see where I have excused the don't tax and do spend excesses that got Greece where they were when it crashed upon them. However, just as Germany, for example, was effectively pardoned for crimes of significantly more epic proportions, getting mired in the past does not solve a thing. If we want it to be a morality play, then Germany has failed to make reparations for millions of innocent lives intentionally taken by willful state action. Germany owes a debt of gratitude to World Jewry in that they refused to proxy price 6 million lives, as did Sven above. At 9 million current dollars per person, Germany owes my family a tidy sum for our relatives in Belorus, all dutifully recorded in Nazi records as they were machinegunned for the aggregious crime of being Jewish.

      But all that shit is obfuscation. The dire state of affairs in Greece, today, is in a great part due to the calculus of the bailout being dead wrong. What the new government has said, and to which the historical record of the bailout attests, is that it didn't work as planned, so don't you think it's time to re-evaluate the plan? It's not like they are a lone voice crying in the desert. Many competent economists agree. Hell, all of Europe, including Germany, has lagged in recovering from the 2008 crash, and the one policy that differentiates Europe from countries making more robust recoveries is AUSTERITY. One can claim to be smart, but when one refuses to consider that a given practice might be at the root of a problem, then one's intelligence is rightfully questioned.

      The morality play card is not going to solve anything. Obstanacy on the part of the Austerians ain't gonna do anything of substance. Rather, it threatens to topple sitting governments in Spain, France, Italy and Portugal, and may be the straw that breaks the camel's back for the curcurrent UK government.

      If you wish to frame the question in terms of what the Greek people "deserve", they are surely more deserving than the German population between 1945 and 1953. If it's a matter of what they "need" to embark on a better course, that's a different question. If Germans can be rehabilitated, I'm sure anyone can.

    2. WEST Germany was 'pardoned of crimes' by keeping it 45 years unfree. Freedom from occupation, sovereignty, was only regained in 1990. "Free world" my ass.

      And those reparations? Well, France and Britain had a choice - get reparations and raise 12 additional divisions with their own conscripts and officers or get over the reparations thing and let the Germans raise those 12 divisions for a total of 26 NATO divisions in Central Europe.
      It was no gift; it was self-interest.

      Meanwhile, there's no European self-interest in forgiving Greece the debt on money it lent a mere four years ago only. Keep in mind some of the lender/guarantee countries are actually poorer than Greece!

      Their way has to be bankruptcy and Grexit, for the macro picture clearly tells us that other than that only sustained intra-European subsidies ("transfers") will work. And I can guarantee you that's not going to happen. West Germans are too fed up with doing the same for East Germany.

  14. Let me return to something I have offered in the past, as the Greek crisis is painted as an economic crisis. Sven has painted economics as a precise science, capable of taking inputs and processes and predicting outcomes. A rather strange stance, as, unlike the physical sciences, economics involves several mutually exclusive theoretical schools. Economics, as my undergrad and grad school profs categorized it, is a social science. For practical and ethical reasons, it is restricted to ex post facto research. Take my doctoral discipline, dual labor market theory, as an example. For me to conduct a controlled experiment, I would have to create an experimental and a control population of peers, randomly place them into the two groups, and then subject the experimental group to the variables I theorize as causing people to suffer the ill effects of working in the secondary labor market. Neither practical nor ethical.

    Now, my understanding of the difference of "real science" and social science was enhanced by serving two years as a grad student member of the University's Committe for the Protection of Human Subjects in Research. Any and all research involving human subjects, to include questionaires, was subject to review to preclude any adverse impact on the subjects involved. There was a required course in protection of human subjects before any grad student could embark on such endeavors. One example of a problem instrument was a "Human Values" questionaire that was so poorly written that it could easily be intimidating.

    Like it or not, economics can exist outside the human sphere. Cultures are different. Some are actually comfortable with authoritarian government, others are not. Different religions promote different views of poverty and suffering. Inequity is viewed differently in different cultures. How can an economist ethically conduct a reasonably controlled experiment testing societal acceptance of selective impovershment?

    Additionally, one has to understand social catastrophe theory. What is the breaking point for a given population? And when that breaking point is reached, what will that population do? Is there an ethical way to conduct an experiment for that?

    The Greek population has been stressed to the point of catastrophe. To be frank, since they were plunged into a depression that shows no turn about in the foreseeable future if the program that caused the depression, is it so surprising that the respose is fight, not ascede? It may not be possible to try to reason with us, as the unknown has suddenly become less distasteful than the known. And is itn not understandable that the intractable position of Herr Schauble only fuels the sociological reaction? When social scientists think numbers trump society, they shhot themselves right in the foot.

    1. You missed the last two decades of econ research if you think it's limited to ex post facto.
      Neuroscience, game theory, psychology, experimental setups similar to psychological research and real time observation of changes identified as being good opportunities for research (including repeated questionnaires, interviews) are all in the toolbox, and have been for quite a while. Only macro is difficult to access without drawing diagrams or doing at least simple math.

      "Is there an ethical way to conduct an experiment for that?"

      You stubbornly imply that Greece is an innocent victims and those evil Germans and Austerians are hell-bent to break it. Greece broke itself already. Germany and others merely wanted to keep it from falling and breaking others, and in the process insisted that Greece uses the huge problem pressure it has for necessary reforms.

      And that's the key; the language isn't even about the same. In the German press the word used is "Reformen", while you talk of austerity.
      Cutting expenses was but a part of the agreed-on reforms. Enforcing taxation was another part, and the recent news in this regard were probably the final jump over the cliff.

    2. Sven, why is it that you and Herr Schauble refuse to address the fact that the program, as designed, inflicted far more unemployment and GDP contraction than predicted by its authors? Greek compliance was rated satisfactory prior to the release of each and every loan tranche. So who is the fraud here? Greece or the agents of the creditors? Herr Schauble's own designated auditors signed Greece's compliance report card, and the grade was always satiśfactory by the time a tranche was released. Now, Sven, in what manner are you going to tap dance around that to deny any and all responsibility for the plan being tragically flawed? Blame it on Versailles? Blame it on Greece not prosecuting the world class German criminals of Siemens? Sorry, but your blame shifting doesn't hunt.

      Or are you willing to claim the bailout's catastrophic results were just as originally advertized, but everyone but Schauble failed to read the fine print, or aren't scientific economists like you, and thus don't realize that the plan's failure is really success? How simple life would be if we all ascribed to the same fabrications rather than reality.

    3. An error in economic predictions isn't even newsworthy. Economic outcomes are no more accurately predictable than the course of a pool ball after eight contacts (and yes, that's physics and it's still not precise).

      And at this point it's not even of interest to Germans whether the Greeks would be worse off without the transfers and guarantees coupled with obligations or not (I suppose they would have bankrupted and left the Euro, no doubt no easy path either).

      You may ask charged strawman questions as much as you want, but what I claim has been on record for quite a while:
      * The Greek governments were all shit.
      * Greece as a state cannot be trusted because it lies at will.
      * Greece is poor because it has a shitty industrial sector.
      * The Greek state is shit. It cannot even enforce its taxation.
      * Greece have been living beyond its own means, visible in trade balance.
      * Greece has brought itself towards bankruptcy.
      * Greece should not get financial aid, bond guarantees, loan guarantees, whatever from Germany. Others may waste their wealth at own risk.

      I would never have demanded austerity from the Greeks simply because I would never have given them anything. I would have asked the Bundestag to pass a law to nationalize life insurances and banks which go bankrupt in the wake of a Greek and Portuguese bankruptcy instead. Their shareholders allowed those companies to be stupid and deserved to be punished by the loss of their equity shares in regulated bank and life insurance company bankruptcies.
      I would never have bailed out anyone. Bailouts are subsidies for stupidity. Bankruptcy, nationalization and slow & steady re-privatization should happen instead.
      Greece needs a lot of reforms, though. The alternative is to stay shitty.

      And yes, I am also on record opposing the excessive German trade balance surplus that was a factor in the whole Euro currency project diverging so much. The surplus the result of the fact that the pendulum has swung from employees to employers too much during the last three decades, which reduced real wage growth
      The problem was that Germans voted the left wing into power late in the 90's, but Schröder turned out to be a Blair clone - a social democrat in name only. A friend of the bosses, not a champion of the '99%'. His government made it only worse, based on industry association scare propaganda about national economic competitiveness that reached back to the Japan scare of the early 90's.

    4. How fortunate you are that the Allies did not consider the Germans beyond redemption. They had every right to. Get over your anger issues. The Greeks did not gun down dozens of your family members, subject the bodies to "economic processing" and incinerate them into mass graves, as the Germans did mine. I got over it, and I suggest you might try to do the same. You double standards undermine your credibility.

      Speaking of which, interesting that you now say that economics is not a precise science when it supports your case. As they say in Texas, Sven, "Pick your lie and then stick with it, unlees you don't mind being a laughing stock." Trying to refute someone with two mutually exclusive definitions of something doesn't hunt.

    5. "(...) interesting that you now say that economics is not a precise science when it supports your case"

      Find a single quote of mine from anywhere where I claim that economics is capable of precise predictions.

      Much can be predicted (rapid growth when the Solow-Swan model becomes relevant / higher prices and worse service in a monopoly market / etc.), but the accurate prediction of economic development with a % growth figure for every year is nonsense. That's what politicians tell to ignorant people, while educated people ignore it and look at what matters.

      We have an annual subsidized economic growth forecast by prestigious institutes in Germany. The average growth of the past 10 years is usually a better prediction for the next year than theirs.

  15. CORRECTION: Third para should read, " Economic CANNOT exist outside the human sphere".

    Damn tablet!

  16. Watched the BBC news last night and was fascinated to see this completely characterized as EU/German probity vs Greek shiftlessness. The Syriza government was described as "flashy" and without gravitas, the EU position as backed by pure reason and economic wisdom. The one thing NEVER discussed? The conditions facing Joe and Molly Greek that would make Syriza...or Golden Dawn...preferable to unemployment and starvation

  17. And, frankly, the part that I don't "get" is how you can discuss this without taking into account the Greek Depression, given what we know of what has happened to peoples and nations hammered by economic catastrophe.

    All this fiscal and financial back-and-forth isn't happening in a vacuum, and I'm not sure that the comparison to Weimar isn't really invalid. Not in detail, but in that a critical mass of the German people in the Twenties and Thirties a) felt that they weren't the "bad guys" for WW1 but that b) they were being "punished", anyway.

    So the left and right that promised to fight this injustice seemed not just a rational choice but THE rational choice when the Weimar government was seen as no better than the fist at the end of the Allied strongarm.

    1. Chief, central to the issue is that Herr Schauble cannot and or will not ever admit he has made evev the slightest error. He will obfuscate, prevaricate and when he sees fit, outright lie, as he did recently did in denying recorded statements he made comparing Russia's Ukraine adventures to adventure by Nazi Germany. Or when he convinced Helmut Kohl not to apologize for comparing Gorbachev to Goebbels, lest it make Kohl look weak. Or his rebutted attempt to put words into Varoufakis' mouth at the press conference after their first one one one meeting. Some say that was the turning point, as no one has ever dared to call him out as a liar. We are not talking about the most honorable man here.

      Back to Versailles:

      As Varoufakis said, in public, to Schauble, to be thankful that the Greek people chose Syriza over the Greek Nazi party, Golden Dawn. The world wasn't so lucky when Germans faced a similar choice to solve their imposed suffering.

  18. Looks like the 11th hour made everybody blink and the can got kicked four months down the road - that's good, in a sense. But the language of the agreement put the Euro 2012 deal back in, meaning that the Greeks are still supposed to put 4.5% of their GDP into debt repayment, meaning that there's still no leeway for Greece to try and ameliorate the Depression.

    So...what? I guess this is a win for pragmatism, in that it doesn't force Grexit. But it doesn't solve the structural problems between northern and southern Europe and it doesn't solve all the physical problems that have made me a long-term Euroskeptic. We'll see what happens if things don't get better in four months, or get worse in Spain, or Italy...

  19. Sven: I hear your frustration and agree with your diagnosis and recommended treatment. The Euro zone should have written off the lost loans in 2012, dropped Greece out of the zone, and moved on. The current treatment plan is causing far more damage, both moral and economic to both the Greek citizens and the Euro zone than was necessary.

    Chief: I am not comfortable that the Euro zone leaders and the Greek leaders actually agree on what the agreement says. Syriza was elected on the grounds that they would cut or eliminate the payments and now the BBC tells us they have agreed to four more months of payments? It doesn't add up and the Greek people will not be happy to say the least.

    Looking long-term, there are no good options. Either the Greeks continue to pay (which they really cannot do) or the rest of the Euro zone discovers they have squandered a large amount of resources in search of something that cannot possibly happen (full Greek repayment of all of the loans with some modest amount of interest).

    Grexit now appears to be the only logical long-term solution. This will be terribly painful for the Greek people and might be pretty bad for the Euro zone as well, depending on how the blame game gets played. As Sven has noted, Merkel will do anything to retain power (and I am sure she is not alone in this) and that, combined with enough blame to go around for everybody, is very dangerous for the Euro zone.

  20. This is the best comment I have found so far on the agreement:

    Analysis: Robert Peston, BBC economics editor

    Greece and Germany have stepped back from the brink. And for now Greece remains in the eurozone.

    But there will be months of fraught negotiations before it will be clear whether the economy and finances of this recession-battered nation have been put back on a stable footing.

    In fact, what was agreed on Friday night guarantees there will be no fresh crisis - no fears of Greece quitting the eurozone - for a full two days.

    Because by Monday night, the Syriza government has to submit a preliminary list of proposed economic reforms - which will form the basis of negotiations till the end of April on a new financial settlement for the country.

    Saved from disaster - for two days

  21. Chief- keep in mind that Syriza took office 5 weeks before expiration of the current phase of the bailout program. They either had to gain some maneuvering space, concede to the same old crap or default. Unlike what we experience in the US, they don't get a couple of months to transition into office. They were handling the Russia sanctions thing within 24 hours of the election results being posted. I'm not sure the "opposition" within the Eurogroup ever got their balance back, considering that the best rebuttal they could gin up was "a deal is a deal". Kida pathetic to have to resort to that when the deal itself has been widely discredited, and austerity has hampered Eurozone recovery. Now it will not just be a matter of deliiberation, but the whole path to whether or not Greece can recover and how is going to be under analysis, and ownership of the process and outcome will be nailed down. That's territory where Germans, particularly of the Schauble stripe, fear to tread. They have made such a career of cover stories to dodge their lapses that it's almost genetic. Bribery was legal in Germany until 1999. Siemen's 1.3 billion in post 1999 bribes were excusable because, well, they just had to in order to get business. Versailles made Seimens pay bribes. (Note- google Seimans 1914 scandal. Twas nothing new).

    Syriza and the growing anti-austerity movement will be joined by a growing body body of austerity doubters to look to see if there really is a problem. Austerity only plows forward because the German juggernaut says so. The socalled scholarlr paper that touted it back when has been discredited in peer review for sloppy methodology. Even the noted scientific economist, Herr Sven, say economic can't predict anything with accuracy, while using a mistated analogy to do so. If nothing else Syriza is leading the Austerian to a Greenspan moment of shocked confession. But this case something can be done before blind goose stepping ideology does damage to more than just Greece.

    The can hasn't just been kicked down the road, but serious inquiry and debunking of false assumptions can now take place. The Austerians are now on the defensive, with the world watchhing. Recon by fire has exposed the intellectual weakness of their positions.

    1. Okay, so I'm going to do something stupid and I'm apologizing in advance.

      Al, you and Sven are trying to communicate from two different sides of a very difficult issue. You are both extremely intelligent, well-educated, and capable people but you are also both living in a world of information and viewpoints that is profoundly different from each other. This makes it very hard for you fully understand each other's comments and very easy for you to see the other person's comments as an attack when none was intended.

      Sven has been curtailing his comments to avoid a flame war (with the exception of his last post on the Greek government, but as I said, I understand his frustration. He views his government as having committed a major mistake with the loan deals and it seems to be determined to emphasize the mistake no matter the cost) and I need to ask you to do the same.

      I, here in the US with a passion for this sort of issue and a different world of information, can barely understand what is driving your feelings. I imagine that Sven feels even more clueless. There has been a near-total news ban on life of the average Greek citizen and what little does come out stinks so badly of bias to the point where I cannot consume it.

      You might better spend your time conveying more context to us so we can better understand your feelings on the matter and be less prone to viewing certain statements as attacks.

      Again, I apologize if I have caused offense because that is not my intent.

    2. Al: "The can hasn't just been kicked down the road, but serious inquiry and debunking of false assumptions can now take place."

      I REALLY hate to say this, Al, and please do not consider that I am attacking you because I am not. I am attempting to clearly communicate with you from beyond a massive wall of propaganda and miscommunication so that you are better informed about what the rest of the world is thinking.

      If you can stand it, please read non-Greek news sources on the deal. They are almost uniformly interpreting the agreement as the Greek government caving in and acknowledging the correctness of the Troika's position. Most of the US is in full agreement. I have not looked at the Chinese or Japanese new sources but I do not think they will be a big factor in the discussion.

      The perception is that the Greek government position is weak and that resolve and discipline will win the day for the Euro leaders. Not only will there be no debunking, but there will be a lot of congratulations all the way around Europe and the US. Nearly all of the really good economists in the US understand that the current program is catastrophically flawed but they are being drowned out by people (politicians and business leaders) who benefit from the current situation or who intently believe in austerity (religious fervor comes to mind when talking with these people).

      The Austerians are NOT on the defensive, there will be NO serious inquiry, and the debunking has already occurred to NO effect. The Austerians are absolutely convinced that God is on their side regardless of how ridiculous this is.

      The only solution is for the Greeks to exit the Euro, the faster the better for everybody. This playing for time is only hardening the already entrenched positions of the Euro leaders and making the size of the loans that will someday explode in the Euro leaders faces even bigger.

      Politicians know that most political problems can be best solved with the application of more time but their instincts are dead wrong in this case.

    3. "Bribery was legal in Germany until 1999"

      It was merely possible to account bribes done in foreign countries as tax-deductible expenses. Nowadays one needs to have slightly more complicated arrangements to the same end (set up a local company, pay it excessively for its service, let it bribe) if one still wants to bribe.

    4. Pluto, I suppose there's a lot of propaganda on the Greek side.

      It seems as if the Greek press and politicians blame foreigners for all woes and focus on the cuts ("austerity").

      Meanwhile, German press is writing about "reforms" that Greece committed to in exchange for aid.

      In reality I suppose Greece has ruined itself (or rather was never nearly as wealthy as it made itself believe), and the 'aid' is a racket that served the creditor's CEOs and shareholders first and foremost. Meanwhile, the Greek politicians had even more opportunities to fuck up, likely accepting favours for the delay of tax enforcement on the rich. Syriza is merely another party that panders a different demographic, and it seems to continue a the blackmail strategy of demanding ever more 'aid' while the fear of a Grexit and Greek bankruptcy has actually faded in Germany.
      Right now, the German taxpayers are on the hook instead of stupid shareholders and CEOs. The influential bankers and life insurance companies which can lobby for their interests have minimized their exposure already.
      Greece has no moral authority to blame the creditors / aid-givers because it voluntarily accepted the conditional aid, which means that it recognized the aid as the lesser evil at least. (Judging by the Maastricht treaty, it shouldn't have gotten any aid, period.)
      Greece got itself into the bigger evil by itself, nobody forced the Greek state to accept easy money and run into deep deficits. Again, their bad.

      I have no more sympathy for the poor in Greece than the poor in Slovakia, Latvia, Croatia etc. and cannot reason why they should get a preferential treatment. I'm angry at our economically incompetent power-centric politicians (I don't like Merkel's party anyway) and don't want more good money thrown after bad money.
      The journalists have begun to call the whole thing a Konkursverschleppung ('delay of bankruptcy', a criminal offence) as well.

    5. Sven: "It seems as if the Greek press and politicians blame foreigners for all woes and focus on the cuts ("austerity")."

      Yes, and there was a lot of propaganda on the German side as well, selling the German public on the idea that the Greeks could change a lot more than they could. I'm pretty sure the Bundestag would not vote to authorize the loans again if they knew in 2012 what they know now about the Greek ability to change.

      Sven: "Right now, the German taxpayers are on the hook instead of stupid shareholders and CEOs. The influential bankers and life insurance companies which can lobby for their interests have minimized their exposure already."

      This is the key statement. We did some similar things in the US during the height of the 2008 crisis (buying General Motors and Chrysler for example) but nothing the US did was as gutsy as the Greek bailout. You got it right when you said that the German government should let the Greeks fall and nationalized any companies that fell with them.

      The Greeks should not have gotten preferential treatment in the first place but they deserve it as long as the Eurozone leaders keep shoving more money at them. I understand your comment about the poor in Slovakia, Latvia, Croatia, etc. but to the best of my knowledge, the Greeks are the ones that got hit the worst which is why I sympathize with them. I am well aware that I personally am just a few really bad decisions by the US government from being in the same position.

      I am glad that your journalists are beginning to catch on to the game. US journalists would be highly unlikely to have do so. It's not that they are stupid (at least most are not) but they are totally dependent on government sources for their news and they would be afraid of getting cut off. The US has a very sick system for journalism that makes me ill to think about it.

    6. The Greek press and people place the blame for the magnified negative impact on an austerity program that predicted, with great confidence, less than one half of the negative impact that occurred. If the "advertized 15% unenployment and 10% contraction is GDP had taken place, the response would have been different. Rather, as the crisis deepened, tha authors repeated said, "You are doing fine. You will turn the corner shortly. Trust us". At no point did an author of the program express the slightest concern that things were tumbling further and further out of control. Only when Syriza was voted in did a few scratch their heads and say that things did seem to go wrong.

      I have not drop of Greek blood in me. We have lived in Greece for 10 years, not as a member of an expat community, but with and among the Greeks. Working Greeks. Honest Greeks. You ask about the suffering, Pluto? Try this on for size:

      About 20% of the population is 65 or older. The program mandated:

      State pensions cut by 30%
      Medicare equivalent copay raised from 10% to 20 to 30%
      A new house tax was initiated. Typical 1,200 sq ft house = 500 Euro new tax per yr
      Full road tax be charged on heating oil. 30 cent per litre increase. I burn about 1,000 litres per winter for a 1,000 sq ft house. Northern Greece would be at least 50 % more.
      Income threshhold at which income tax is applied dropped from 12,500 to 5,000 per year
      All the above enacted at once

      My neighbor is a 75 yr old, retired, self employed fisherman who paid into the state pension program for decades. At 65, he retired with 1,100 Euro/mo. No COLA. Now 30% less. You do the math and tell me whether retirees are suddenly hurting.

      Since banks required liquidity infusion due to capital flight in the initial panic, string attached was to cut all employee salaries. My neighbor, the senior customer service rep and supervisor of the tellers, with about 20 yrs service, was making 1,600 Euro/mo. Now making 1,100, and facing the above mentioned increases in cost of living.

      Unemployment benefits dictated to end at 18 mos. People not receiving unemployment benes not eligible, by troika mandate, for state funded health insurance that covers medicine, supplies and room cost if hospitalized. However, doctor and other health practitioner care in public hospital is free. Public hospital staffing also dictated to be cut, so access has dropped .

      Troika tried to force electric service termination for unpaid bills to public power company, whether needy or not Fortunately the Greek Constitution forbids such in the case of the needy. With 28% unemployment, I would guess there are, indeed, a few needy. One Troika genius said that if the government had privatized the public power system, then the government wouldn't be bearing this expense, nor would the private power company, as the Constitution only bound a public entity to not abandon the poor. Guy was totally comfortable proclaiming such wisdom in a public forum. Think about that a bit and then ask yourself if some Greek ire toward foreigners is justified.

      I am sick of foreigners painting the entire Greek population as whining, greedy, self serving fat cats. I can only imagine how a Greek feels. Until you have lived with a people, you are on thin ice stereotyping. I don't care what academic expertize you claim. I have lived in a few countries over the years. We moved to Greece because of the people, not for cheap cost of living (hasn't been significantly cheaper).

      Does that give a snapshot of something resembling suffering? Or do you want stories of thousands of small family businesses that closed as a result of a 25+% GDP contraction? Or two families that will consolidate into one three bedroom, 1500 sq ft house for the winter to save heating costs. Fortunately, 4 adults and 4 kids under 7 yrs old can fit in such a house if they have to. Yup, loads and loads of fat cats here.

  22. Chief, Have you considered the moral bankruptcy of the "Versaillis made us do it" defense. Varoufakis alluded to this at his press conference with Schauble. The Greek people had choices. Golden Dawn was in third place with 7% of the vote. The other 90+% of the population is embarrassed by that mere 7%. Other countries where anti-austerity parties are moving into the fore are also not choosing Nazi nor NeoNazi parties. They are choosing both left and right wing anti-austerians. Mein Kampf was Hitler's published road map. The German people didn't fall for a "bait and switch", but voted in the real deal. Versailles put the Gremans in a position to make a choice, and the results were their choice by far, far more than the 7% that has gone Nazi in Greece. Versailles did not nominate nor elect anyone.

  23. Sven and Al have touched on an important point that I think needs some amplification.

    What has happened is that extremely large private debts incurred in pursuit of private profits have been transformed into public debt. That transformation is where the fundamental robbery took place. (some years ago in fact, but not enough people screamed in outrage at that point).

    Now, we have a situation where the public sector is unable (either financially or politically) to pay off these debts. To make matters worse, the public sector is split into fragments, each of which is trying to foist the burden of this debt onto a segment that doesn't include them. However, the 'foisting' turns out, it will have little, if any, correlation to those who foolishly (in retrospect) lent the money or those who (foolishly) accepted the money.

    In many ways it is a remarkable con.

    1. Ael- you are speaking of the case of Ireland, Spain and Portugal. The Greek governmet got into massive debt all on its own. However, banks do have skin in how the Greek crisis has been handled since day one. In 2010, if Greece had defaulted, it would have wiped out Germany's banks, due to the massive level of Greek bonds they held. Thus, a default was unthinkable. Since the initiation of the bailout, German banks have sold off as much of those bonds are possible to taxpayer backed institution participating in the bailout. Between a 35+% reduction of such holdings and new emergency funding to protect the Eurozone banks, a Greek default would be of a very managable level to Germany's banks. Does that shed any light on the sudden hard line?.

    2. Don't forget Cyprus and Italy. There is a lot of shuffling clam shells around, under which there are relatively few peas. I see a clear trend as to who gets the empty shell.

      I expect this trend to continue, barring revolution

    3. While on the subject of banks, the lenders of household debt, the Greek people are culturally debt averse. As I posted previously, only 30% of residences are mortgaged, the lowest rate in Europe, while 78% of families live owned homes. Because the type of construction allows it, most non-urban home owners take a few years to build their home, progressing as they have the cash. Per capita household debt in Greece is 11,500 Euro, vs 29,000 in the UK and 19,500 in Germany. Counter to purveyers of anti-Greek propaganda, the bulk of the population leads a modest life. A "high credit line" credit card tops out at 5,000 Euro. They aren't living on borrowed money.

      In 2001, potential foreign investers in Greek banks, looking to cash in on the mortgage boom, offered huge amount of capital if the Greek banks would push more mortgages. Net result was that the % of homes mortgaged rose from 28 to 30% and leveled off. Personal debt just ain't popular in Greece. Government debt is, of course, another story, as we know, and that's a long and complicated story.

    4. Ael- you just hit on the Austerians, and their corporate/banker patrons feared - revolution. If not, then why would Merkel, the Portugese and Spanish PMs have made direct, public appeals to the Greeks not to vote for Syriza? Some coyly, and others blatantly. Some in "encouraging" fashion, others in clearly threatening tones. To me, that's absolutely chutzpah to attempt to sway an election outside your national borders. But Syriza has raised the hopes of other peoples suffering under austerity, and since every country in the Eurozone is still lagging behind other industrialized nations in recovering from the 2008 US initiated mess, that means not only the overt manifestation, but latent potential as well. It may not be a revolution in typical terms, but a lot of sitting governments are at risk if the people suddenly perceive they can actually vote for change. A whole new concept of democracy, isn't it. And the Koch Bros and their Euro kin don't like it..

    5. " If not, then why would Merkel, the Portugese and Spanish PMs have made direct, public appeals to the Greeks not to vote for Syriza?"

      REALLY? You cannot possibly think of an alternative reason?
      Such as their political future depending in part on the delay of their voters' insight that they wasted billions of taxpayer money on Greece?

    6. Sven, interfering in another sovereign nation's elections, however slight is a serious breach of international relations. The program, as designed and applied had no chance of success, and while contuance of the status quo might have sealed a German election, I'm not sure it would save Spain or Portugal's Austerians. And, in the medium run, if the current plan were to collapse, it will be the collapse of a Merkel plan. Giving Greece a chance to modify the plan lifts authorship from Merkel and Schauble's shoulders. Worst case is that the Syriza plan works and Austerianism, along with Merkel and Scouble have to scramble to prove their plan could have worked, or are just plain refuted. At least they can try to salvage some cred. Best case, for the Austerians, who don't seem to care about the Greek people, is that the Syriza plan fails and all culpability is Greek. Seems to me that shifting some ownership for the solution to the Greeks is the cleverer political move, unless the Austerians fear that Varoufakis can pull it off.

      If a head of state is going to gain political traction at home by m4ddling in another nation's elections, then my opinion of that state's leaders AND of that state's people is seriously diminished. I would have a better opinion of the German, Spanish and Portugese people if only the Greek people were the target of such actions.

  24. This might be relevant to your interests:

    He does - like Krugman - not grasp the political freedom of action and rigidities. A big part of the motivation to insist on reforms (in the apparent false expectations that they would increase the odds of having the bonds repaid without a pyramid scheme) was that necessary reforms were only feasible under the pressure of severe crisis.
    This feasibility thing is not properly worked into economic models because it's a political science thing, and the application of Phlipps curve etc. only as suggested by Mainly Macro, Krugman etc. misleads.

    In the end, it's a mess, and one shouldn't be surprised by it remaining so - either way.

  25. More thoughts on "revolution". Brilliant economist, Alan Greenspan, believed that the financial markets did not need regulation because he was convinced that institutions would never act against the ir own self interest. Thus, no need to worry about what happened to cuase the 2008 crash. Of course, Alan believed in a non-existent form of institution - one without human beings. Human beings have a long history of acting against their own self interest, both individually and collectively. By action and inaction. For immediate gratification or not.

    People talk about approaching, or standing at the cliff. Been 40 years since I was exposed to it in grad school, but the most coherent theory of catastrophe theory we looked at, in terms of living beings, both individually and groups, holds that the actual location of the cliff is impossible to identify, until it is passed and the fall takes place. Further, the distance and direction in which the fall moves, no less the landing plane and position thereon are equally unpredictable. And, as geologists like Chief will attest, a cliff can effective come to you. How much weight can an earthen bluff support before it gives way? We think we are near the "cliff", and suddenly, it is behind us.

    Thus, one can apply ex post facto research the explain why Versailles caused a social catastrophe, but the best such research has to offer is that a similar set of circumstances in the future simply poses the potential for catastrophe. Much like a hot topic of the day - torture. It is impossible to predict who will break, when they will break or what will break them. Living beings are a product of their experience and how they perceived that experience for the purpose of future choices and objectives. You can toss around probabilities, but not precise predictive equations. There is a strong element in American culture that believes that "war works". Yet, there are many other advanced societies that firmly believe that to be heresy. You cannot factor out the human element, as each human is, in the final analysis, unique, just as each society is unique, however similar they may seem. Thus, since economics cannot take place in a humanless vacuum, it is subject to the same unpredictability as human behavior.

    Behavioral psychologists have done numerous experiments pertaing to the so called "flee, fight or surrender" phenonmenon. While probabalistic results can be generated, a given subject's choice is unknown until faced with the stimulus that forces the choice. And, individual subjects will change behavior based on the outcome of previous choices. "War works" for Americans for a variety of reasons, not the least of which is the lack of a home game in over a century, and that home game being romanticized to mask the horror.

    Thus, in Europe, anti-austerity movements amongst those who perceive they are unjustly suffering are both right and left wing. And, since we are talking about perception, what one culture sees as unjust suffering may very well be seen as just desserts by another. I can't feel your pain and you can't feel mine. Empathy and sympathy are feelings not physical fact.

    So, I return to the video of Jacob Bronowski, as scientist who stood shoulder to shoulder as a freind and colleague of many of the greatest of his time. When man thinks he has or approaches absolute knowledge, without "touching people", not only is he wrong, but he will commit horrible acts.

  26. Continued-

    When gross stereotype is applied in playing the blame game, there is going to be significant colateral damage in the punished population. Both in absolute terms and in perceived terms. Any alleged statement of absolute fact that is applied to a given people is a fraud from the outset in that at least one subject in the population does not meet the criteria. Show me the "science" that supports someting like "the people of country X are this or that". Common cultural or social trait, perhaps, but absolute? Should we incarcerate all bank executives because a fair number were proven to be unprincipled? If 25% of a given level of management in a given company actively supported bribery in the past, does that predict, with any level of confidence, that 25% will do so next year? We are talking about people, and the experiential learning of at least some will be different today than it was yesterday. Again, we can only offer probabilities, not precision.

    Thus, many universities define economics as a social science. Some go further and not only define it as social science, but particularly as "political economy". The intimate intertwining with humans is because economics are influenced by people, socially and politically, but also impact on people. Until once addresses the human element, one will be as fatally wrong as Alan Greenspan, whose legacy will always be tarnished by his ideological ignorance.

    So, from a cold blooded viewpoint, assuming the blame game successfully pounds those nasty Greeks into submission, will the rest of Europe meekly get in line for their just desserts? Is it socially and politically prudent to try to find the cliff by blindly walking forward, or to crowd more and more people a "safe 3 feet" from what looks like the precipice? Does anyone really have that level of absolute knowledge? They didn't in 1933, and I doubt they do today.

  27. "why Versailles caused a social catastrophe"

    Several empires crumbled at the end of the First World War without being subjected to such a treaty:
    * Russia
    * Ottoman Empire
    * the 500 years old Habsburg Empire (Austria-Hungary)
    Italy fell to Fascism a decade before Germany did, and Italy wasn't even an official war loser.

    The reparations of Versailles were not very influential to the common people because they were largely being paid with gold reserves, currency reserves and foreign credit (especially since 1924). The troubles caused by the German wartime debt and the inflation that deleted it were much more influential for the German economy of the 1920's.

    The Versailles reparations only became the part of the death knell indirectly, when due to the 1929 crash in the U.S. Germany had to repay the new foreign debt of the 1920's in gold or USD without getting new foreign credit.

    The Versailles treaty was but a brick in the wall against which Germany crashed.
    In fact, it did even have an upside because it depressed military spending while France and the UK spent several %GDP more on their military.

    1. Sven, I think that there is a strong emotional desire on the part of non-Germans to accept the "Versailles caused it" line of thought, simply because it is very difficult for someone to deal with enormity of the horror Hitler caused. Rather than accept that humans could voluntarily indulge in the more extreme behaviors witnessed, it is a bit less discomforting to say they were forced into it by the well intentioned, but ill advised actions of the victors. Kind of a blameless guilt trip - "if we only could have known".

      It is no less of an selective handling of history than the glossing over of JCS 1067 and letting the dialog address post war conditions as, "The Allies crushed Germany and then helped them through the Marshall plan." That there was 2 two year, almost inhumane period of occupation between those two milestones is about as forgotten as Dresden.

      And, if I were a German, I would probably acquiesce to the "Versailles made me do it", for obvious reasons, and let JCS 1067 be glossed over, lest it be an admission of possibly deserving it..

      Not being judgemental, just commenting on human nature. Especially since both sides of the confliict seem content with such editing.

    2. The problem with all such poor perceptions and interpretations of history is that imaginary lessons from history distort future policies.

      The Marshall plan was quite a failure in most countries, and 'worked best"' where it was applied late and little because those were the defeated countries which recovered after inflation and end of price controls according to the exogenous growth model.
      It was the First World War which broke so many of Europe's societies and states first and foremost, not the peace (treaty). People should remember the destructiveness of war, not blame it on war-ending diplomacy. (Versailles didn't help, but maybe it only ensured that Weimar would eventually succumb to the right wing, not the left wing).

      Lots of old myths are being maintained in Germany because they support the preferred narrative of integration in the West. We couldn't possibly question the great effects of the Marshall plan as a nation because this would disrupt "transatlantic friendship" etc.

      By the way; I consider separately Hitler coming to power in 1933 and going all nuts in 1942. The pre-1942 Hitler was a very different person than the post-Battle of Moscow Hitler in his actions. Pre-1942 he was a cynical high risk player with a sick view of the world (history), beginning in 1942 he was just an increasingly fatalistic madman and junkie.
      Regrettably, I have to say I have met plenty people with a similarly sick view of the world (history). Just look at how easily people like Sparta, which was a tiny prototype for Hitler's plans for Eastern Europe.
      Or how easily they speak of national power or size as an end in itself instead of as a (questionable) tool to further the interests of the citizens.

    3. Sven, the myths and historical edits are maintained so that people can feel comfortable, eespecially when trying to put cataclysmic events into a palatable form. A close cousin to conspiracy theory. My dad used to say, "Man has always tried to make sense of his universe. If that becomes uncomfortable, he will reorder the universe to make comfortable sense."

  28. We are in London at a friend's for week, thus the tablet and many typos. Did a pub night yesterday with a dozen locals from our Vespa touring club. One brilliant young lady, a risiing star in English jurisprudence made an interesting comment on what we are discussing here. I paraphrase, as a few pints has been consumed:

    The volitility of the poor who have long struggled to put food on the table pales in comparison to those who perceive that the food has been taken off their table. The object of any hostility of the former is usually their lot in life, while the object of the hostility of the latter is he who took away the food they once had. When the numbers of the latter grow to a critical mass, they will convince the former that their hostility should be towards their common oppressor, magnifying the potential for ignition exponentially.

    Interesting view. And she didn't refer to the "party of the first part or second part" at all.

    1. Ludwig Erhard wrote something similar, stating that spreading the wealth and turning the country into a middle class country is much easier done by distributing gains in economic output accordingly than by redistributing the existing output level from rich to poor.

  29. Al: "Does that give a snapshot of something resembling suffering?"

    Yes, a much needed one. The tiny bit you've given us is at least 10 times more than I had before.

  30. Yes, Pluto, it's grim. That beach bar job Sven's source of all things about Greek island labor market is now probably filled by a primary breadwinner. At 28% unemployment, providing summer jobs for German college kids is a luxury we can't afford. Now a husband or wife who lost a full time job does it for 150 Euro/mo less than the college kid got. Yup, the bailout imposed a lower minimum wage. Wouldn't be so bad if our normal tourists tipped, but many destinations draw non-tipping tourists from notoriously cheap countries that say we are fat cats (hint).

    The Greek media doesn't do a lot of "Woes of a suffering father" articles, because we all know many in real life, or are one. It's not like there are pockets of suffering isolated from the mainstream "fat cats". Your collêge educated friend at the bank is suffering, as noted above. You can't help but know a retiree or two. Your corner grocer and the neighborhood shoe store went out of business, just like 30% of all small businesses.

    I get a bit chapped hearing "authoritative" crap from far off observers who have no on site experience other than, perhaps a vacation here, wikipedia and their local newspaper. Live on a Greek island and everybody thinks of Onassis. It's a hardscrabble life, and people bust their buns to welcome tourists who think we live the life of Riley. Thus, those tourists have no compunction about loading their beach bags with hard boiled eggs, bread and cold cuts from the breakfast buffet to serve as a free lunch, and even dinner. And leave what they don't eat behind for the cleaning staff to pick up. Won't get into nationalities, lest I be thought to be flaming, but it ain't just Americans that are ugly when outside their native land. And, they are dumb enought to think that those dumb Greeks not understand other languages. I got so tired of tourist racism, that if we are eating out, and I overhear someone demeaning the Greek staff in one of the few languages I know, I tell them, in their own language, that they shouldn't assume no one understands their offensive behavior. Amazing how much ignorance there is in this world.

    Cheers to you. As my neighbors say, at least we have our health and good friends.

    1. "That beach bar job Sven's source of all things about Greek island labor market"

      Reading what was really written would show that this quote is utter nonsense.
      I used the example of my friend a subtle hint at how rather mobile labour models actually exist and work well - and even more subtly a hint that maybe Greece has such as piece of shit economy because it's too rigid.
      How could one set up a major car assembly line in Thessaloniki if hardly any Greeks would consider moving there because they feel bound to their owned home? I know a historical recruitment poster about the construction of the huge plant in Ingolstadt; they were looking for labour from all over Europe. You cannot industrialize much without migration. A country that's got marginal labour mobility cannot do well in economic development unless it's a city state.
      Having written this, I think you exaggerated the rigidity in an attempt to make an abolishment of subsidies for Islanders look more harsh.

      By the way; said friend of mine would get the job on Crete any summer he wants. He's friend with the owner, beach barman is vacation for him in comparison to his normal jobs and the very successful beach bar owner on Crete is an Austrian like him. Apparently, the local Greeks were not able to create the ambience favoured by many of the tourists there.

  31. Sven, I do not claim to refute your pal'ssummer job and its security under racial cronyism. Nor would I even suggest that he didn't file a Greek income tax return, and am sure he mage the required monthly contribution to the Greek social security system for access to free national health care.

    The bulk of the summer hires in the Cyclades, xince the rise in unemployment the only area in which I have knowledge, are mainland Greeks. Work permits for the typical non-EU citizens that had once filled many of these jobs are not being renewed. I can't answer your hypothet about a fictional auto plant in northern Greece, as there hasn't been an unemployment crisis such as today, accompanied by such a plant opening from which to gain experience to hypothesize from.

    I don't know if you have ever been a homeowner that lost his job during a depression and had to relocate. You have two choices for the unmarketable home. Abandon it and lose the investment, or maintain is in a vacant status, paying the fixed expenses of taxes and insurance. If the home is mortgaged, abandonment is a double hit, default results in loss of equity, and you cannot get another mortgage for and extended. If you maintain it in vacant status, you still bear the mortgage expense. Such was the dilema that thousands of auto workers faced when their jobs were moved to lower wage, new facilities in the south. Those that moved will likely never recoup their economic loses. Loss of investment in home, costs of replacing personal possessions that were not economically reasonable to move, artifically high rental costs due to influx of new workers who could not own and reduced wages. However, all those new jobs, new rental revenues and replaced furniture, etc made for great local economic figures. However, individual net worth and standard of living plummeted. Economists patted themselves on the back, and sociologists wept.

    BTW, a while back, you cited a wikipedia page to prove that the US does, indeed have a "value of life" figure. While that is used for some specific EPA modeling, I would note that in law and practice, the reality is not so. The federal government does not, for example, put a dollar limit on necessary medical care, be it life saving or not. Further, by law, a private insurer cannot put life time limits on a policy holder. That even includespersons in a persisten vegatitive state requiring inpatient life support. The decision to "pull the plug" is only by an advanced directive by the patient, or lacking same, the consent of the legal guardian. Since you seem google fluent, read about how Governor Jeb Bush fought to force a vegetative woman to be sustained indefinately at state expense, over her husband's wishes.

    1. "racial cronyism"
      Seriously? I told you the bar owner was his friend and you call a man giving a friend a summer job "racial cronyism"? Why don't you write outright that you're far from objective?

      "for access to free national health care."
      He almost certainly handled this with a German health insurance, for which one can get the necessary papers for a few months abroad.

      "default results in loss of equity"
      This depends on the contract and the regulatory restrictions within which it's in effect. I suppose a well-functioning government of a people of homeowners would do better. Oh, wait.

      A "pull the plug" scenario isn't a good one; even a decade of care don't really amount to USD 9 million. Furthermore, the metric is relevant in resource allocation on the policy level and nobody in here claimed that any person called "Bush" is or was good at that, right?
      Policy regarding subsidies for almost a million islanders is on a very different level than a single person in a hospital, particularly since the latter became a figurehead for shaping the governor's political profile.

    2. In the USA, the cost of full life support for a brain dead person is considerable.
      A typical hospital bed costs about $1500 a day.
      Add in full mechanical ventilation - $800/ day
      Add to that the cost of nutritional support - $500 / day
      dialysis - $100/day. (may not needed)

      Total costs about $2800 / day

      i.e. about a million dollars a year.

    3. Sven, that was a tongue in cheek comment about, as you described it, one Austrian offering another a guaranteed job. If you are employed in a given EU country., you are required to pay the social welfare contribution in that country. Reciprocal health care is for visitors, not workers.

      Default on a mortgage in the USA is most typically a total loss, as is the case in most countries. Especially when the housing market is severely depressed. The home is offered as is as colateral. Be careful of sweeping statements again, like " no country subsidizes ferries other than Greece".

      I offered the LoSchaivo case as an example, as it is the most easily googled. Point is, public policy and federal legislation prohibits restricting needed resources to an individual on the basis of cost. Obviously, not many Americans will need 9 mil in medical care, but running up a bill of 500,000 in a year is not so uncommon. My point is that no "value of a human life" law nor policy exists that can constrain the resources to prolong or protect a given human life. Hypotheticals and models do not suffer mortality, so all the averaging and weighing and models in the world have no relevance when it come to an actual living being who will by law, be the bneficiary of all the resources necessary to sustain life, even if that life is in a vegetative state. Not saying whether I think that is good or bad, but stating the fact at hand.

    4. Ael- a 2005 study published in the US National Institutes of health put the average cost of mechanical ventilation at 1522 dollars/day. Factoring in the rise in health care costs. in the past 10 years, I would suggest the ventilator to be close to $2000/day. That puts your barebones (no meds or lab serivices, etc) price at $4,000/day, or 1.46 million/year.

      The huge and rising cost of healthcare in the US will, in the foreseeable future, result in catastrophic collapse of the healthcare industry, as they price themselves out of business. The current fee for service, multiple payor market is not sustainable.

  32. Pluto, I forgot to mention the the imposed 30 cent increase in heating oil has just been rolled back, because not only did the increased tax revenues the Austerians forecast not materialize, but consumption collapsed to the point of significantly reduced revenues. Hopefully, some won't experience such a cold winter. Parishioners in quite a few Churches in Northern Greece had stopped heating the church building on Sunday, other than that necessary to prevent freezing damage, and redirected that money to relief programs. Most say they will continue to divert their donation this way until the crisis eases.

    Of course, it's had to predict if the reduction will increase consumption to where the revenues at the lower tax rate will again be realized. Understandably, the public perception is that it was just another failed austerity measure that increased suffering. I mean, who would have thought that a 30% overnight increase in the price of heating oil would reduce consumption in a population concurrently experience a 28% unemployment rate and 25 - 30% reduction in wages for those still employed.

  33. The Law of Unintended Consequences - Part II

    We left off with how the Austerians' 30% increase in heating oil tax, to gain more revenue, resulted in significantly less revenue. Wełl, those dumb, lazy Greeks put 2 and 2 together and got 4. Electric heat is less efficient and thus more costly, but solid combustibles can be found everywhere. For less than 200 Euro, one could buy and install a nice little wood burning stove. Since Greek construction results in non-combustable walls, floors and ceilings, just cut a hole in the wall for the flue, and you can heat a room quite cheaply. In fact, wood pellets and compressed wood logs are cheaper than electric or oil, and combustable trash and tree cuttings can be had for free. Wood burning stoves sold like hotcakes.

    Now, urban Athens has a population of about 3 million. Lets be overly conservative and say the average household size is 5. That's 600,000 residential units. And let's say that 2% of those residential units installed just one wood stove. That's 12,000 seriously polluting wood stoves in a 159 sq mile area. Now, no one really knows how many wood stoves were put into operation as a result of the crisis. Rather, they do know, from the government's ongoing atmospheric monitoring, the the colder tlhe ambient temp, the poorer the air quality in Athens, with winter air quality being in the "serious pollution" zone for the first time during winter months, even though automobile usage, as measured by gasoline consumption., primarily due to combustion particulates.

    Folks are not just looking in dumpsters for food, but fuel as well. On the plus side, combustable litter, during the winter, is at an all time low.

  34. Well, a breather has been settled upon. In a way "morality" was given a bit of a nod, as the Eurogroup finally, although only tangentially, admitted the program had had dire humanitarian impact. Considering that serious concerns about the social cost of the program were expressed by the IMF's point man in Athens three years ago, there are still quite a few key players amongst the Austerians that have not acknowledged that the human toll has been severe. Considering that the Austerians took close to a year to devise the current "program", it's interesting that they gave the new Greek government, which had been in office less than a month, a weekend to offer their very constrained "adjustments".

    However, the Athens Plan, which has been accepted by the Eurogroup and now goes to some parliaments for approval, clearly states that the government will introduce measures to deal with the country’s “humanitarian crisis", with "no negative fiscal effect". Sine there were numerous bailout terms that did contribute to the humanitarian crisis, it now appears that Athens will have latitude, within a net sum zero constraint to drop some that are excessive and boost some that aren't. An example would be Austerian demands to cut pensions further and increase VAT, which will not be dome.

    Another significant element of the Athens Plan is bringing the OECD into the equation, introducing an honest broker for the first time, with no pride of authorship, nor home state elections pushing sub optimal decisions. The OECD is an economic development body, not a fiscal or political body. Might just bring in a breath of objective fresh air.

    1. The Greeks are in the beggar position. They do not get to set conditions or timetables.

      Let's not forget that what the Greek government wants is an influx of others' money (=wealth).

      BTW, the press reports indicate an increasing alienation of other European governments from the new Greek ones, and they also indicate that Syriza's leaders are giving up the pipe dream of their campaign promises.

      The new Greek government's greatest effect so far has been to push the country deeper into crisis by
      * making Greeks believe that to withhold tax payments is a good idea
      * making Greeks believe that capital flight is a good idea now
      * making Greeks believe that a bank run is a good idea now

      By the way; it's heavily disputable that Greece lived through a dictated austerity program since the Greek governments never really met most conditions.
      I read an article yesterday detailing the experiences of one of the Troika guys; according to him they learned the hard way that they needed lots of people with Greek language skill to see through all the new legislation of Greece because the Greeks hid giveaways like subsidy increases in new laws that were almost entirely about completely different, uninteresting topics.

    2. Wow, what a revelation! Someone might need skill to read the language in which a nation's laws are written to understand what those laws say. Crafty, those Greeks, changing to Greek to write their laws after the bailout, when they were in German and English for centuries prior. What's the definition of "lots of people, Sven? 100? 200? 300? Are such numbers in short supply outside Greece? How about all those educated Greeks you mention that have sought a future elsewhere in Europe? Oh wait, they are Greek and will lie. Or is this one "Troika guy's" pathetic attempt to exonerate himself?

      As to whether or not the previous Greek government met any conditions, the fact is that each and every tranche of loan money was predicated by the Troika inspectors certifying acceptable compliance prior to disbursement of the loan money. Your "Troika guy's" claims that he was not able to evaluate what he was inspecting reflects poorly on the "Troika guy" and the Troika, not the Greek government. After every Troika compliance visit, the Troika was publicly patting itself on the back for the excellent job they did in insuring program compliance. Now you say they were really just fools or liars?

      The new Greek government has been in office 7 weeks, Sven, the first 4 of which were bogged down in getting some breathing space, which was not available on the day they took office. Of course they have alienated others, and with help from incredulous accusations such as "Troika guy".

      This last post is way beneath you, Sven.